Northwest-backed group offers takeover bid for Midwest

photo: "Midwest N905ME", by Drewski2112

A group of investors, led by TPG Capital and which includes Northwest Airlines, said that it would buy Milwaukee-based Midwest Air for $400 million. The TPG-led bid was announced right after AirTran, which coveted a Milwaukee hub, said that it would no longer pursue its hostile takeover of Midwest. AirTran's final offer of $15.75 a share was less than TPG's $16.

Beyond the per-share figures, though, there might be another reason that Midwest might go for the TPG bid. The airline code-shares with Northwest, which is a key player at Milwaukee. Northwest didn't want another airline to move into the market, so Midwest's rejection of the AirTran bid is good news for them. However, Northwest said in a statement that they would not take part in managing Midwest (if the TPG bid is successful, of course).

The deal still needs to clear the anti-trust regulators, and AirTran CEO Joe Leonard has voiced, unsurprisingly, pessimistic views about this, saying that the "Midwest board has chosen a path that will benefit current senior management by selling out to a private equity firm and a so-called 'passive' investor whose involvement will surely raise antitrust concerns, casting doubt for shareholders on whether a transaction can, in fact, close." But a Midwest spokesperson was more upbeat, saying that the airline expected the deal to go through.

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Air France and Delta might become closer

photo courtesy of caribb

The AFP and the French newspaper Les Echos are reporting that Air France is in joint-venture talks with Delta Air Lines, which is a fellow SkyTeam partner. A spokeswoman for Air France said that it "is still in negotiations with Delta, but nothing has been finalized". She also said that "the agreement being negotiated should be signed in the autumn."

The joint venture would happen in two stages - the first would start in April 2008 and include New York - Paris flights, as well as flights from Heathrow airport in London to cities in the US. In 2010, the second stage would cover the rest of Air France and Delta's trans-Atlantic flights. Les Echos reports that both airlines would split their profits from their main trans-Atlantic routes 50-50.

Air France-KLM, Northwest, and Delta have also applied for a joint venture agreement. Northwest and KLM have been close partners for more than 15 years, and this venture, if successful, will bring the four much closer together than they already are (all are SkyTeam members).

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Northwest to exit bankruptcy on May 31

Northwest Airlines, which has been in bankruptcy for the last 20 months, finally received approval from a bankruptcy judge on Friday to exit Chapter 11 bankruptcy on May 31. Northwest is the last US major carrier in bankruptcy, and like many of its competitors, it used the process to significantly cut costs - about $2.5 billion. In Northwest's case, the airline has become a lot more competitive by retiring older planes (the entire DC-10 fleet and some DC-9s), moving domestic capacity to international routes, and getting concessions from labor unions.

"I want to thank our employees for their hard work and sacrifices that helped Northwest attain its goal of repositioning the airline for long-term success," said the airline's CEO, Doug Steenland, in a statement. Many believe that even though Northwest's stock will probably not fare well on Wall Street (it will being trading under the symbol NWA), the airline has a better outlook. Airline consultant Mike Boyd said, "They're going to be in a very strong position. They have a strong vision of what they want to do. If you're going to bet on an airline, I'd bet on them." Northwest will, next year, be the first North American airline to fly the new Boeing 787.

But the bankruptcy was no doubt hard on employees. Some interesting figures from the Detroit Free Press: Northwest had 33,755 workers when it filed for bankruptcy in September 2005; it now has 30,787. During the same time, the annual salary for a 15-year flight attendant fell from $44,184 to $35,433, and CEO pay fell from $571,354 to $516,384 (although the CEO also gets $26.6 million in stock and options over four years, so don't feel too sorry for him).

Northwest has evidently used the process of Chapter 11 to its advantage; it has unloaded a lot of costs and trimmed the airline down to a more competitive size. Yet it also has to contend with renewed competition from other airlines that have gone through the same process.

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